Greek banks are determined to make the most of the tools at hand to ease the burden of their nonperforming loans. They have resorted to buying back the repossessed houses they auction, in a bid to send a message to strategic debtors, while intending to start taking control of companies that are unable to pay their debts to the credit sector, something which is done in many European countries.
In some cases banks have already started using property auctions as a means of dissuading borrowers from trying to dodge paying off their arrears while they can. Other objectives are preventing property prices from crumbling further, and recording revenues. This practice is expected to be implemented in full in the coming months, as the stock of major properties to be auctioned is set to grow.
Banks foresee the auctioning of 5,000 properties per year from 2017, while a website that details upcoming auctions whose dates have already been set is being augmented with new announcements every day.
Of the auctions already published, it appears that two-thirds are instigated by banks, while a significant share comprises properties which have been put up by private parties.
A second drastic measure aimed at accelerating the clearance of bad debts and restructuring problematic companies will come via a government bill providing for the banks’ undertaking of enterprises that owe them money and the ejection of shareholders who refuse to assist in the streamlining of their companies by contributing money or prevent their sale.
The measure will provide for the undertaking of the debtor company’s management when the enterprise’s debt exceeds its net commercial value, without having to get prior approval from a general meeting of the company. This will be followed by the measure of debt to equity swaps that Bank of Greece Governor Yannis Stournaras recently announced in Parliament, whereby the arrears of a company will be turned into shares owned by the banks, as applies in the UK, Germany, France, Spain and elsewhere.